Patrick McGee

China knows better than anyone how instrumental Apple has been to its own industrial prowess and that they wouldn't go after them because they get too much out of it.

What Apple really figured out 25 years ago is that it's more important to own the process than it is to own the factory.

The narrative is really of a company figuring out how to separate knowing how from actually doing it.

In the 1950s, 60s, 70s, and 80s, there's competition between Japanese and American companies at a firm level of who can build more quality products.

And Apple basically outcompetes the Japanese by coming at them at a sideways way, by, in a way, using the supplier's own skill sets against them.

I'll give you an analogy.

The original iPod, that product is like 70% Japanese componentry, but wrapped in an American design.

It's this American company that figured out how to sort of like give the logistics together, design it really well with Johnny Ive and have brilliant software that the Japanese couldn't compete with.

But they're using Japanese companies to do the hardware.

They're not building anything, but they're designing things and they're specifying things.

And then really importantly, then they structure deals where when they co-create something with, let's say, a Sony or a Samsung, they will use their leverage to own the IP behind a co-creation.

So once Apple owns the intellectual property, they can share that process with another company.

So if Lynn creates this brilliant thing for me, but I own our joint creation, I can tell your colleagues how to do it, which basically is an abuse of power to some extent, although it's legal, because you're losing your secret sauce.

I'm extracting the manufacturing DNA from you, and I'm sharing it with your direct rivals, which diminishes the leverage that you have against me.

Now, the good thing is we are working together.

I am teaching you, but I'm also learning from your rivals and then teaching that back to you so that there's no differences between the various parts that I'm getting from three strategic partners.

So Apple was brilliant in a way because they didn't outcompete others by building quality products.

They just owned the processes, the specifications and the equipment behind all of it.

I think that's a totally fair statement.

And when Trump tried to raise tariffs to 145%, I think was the peak last year against China.